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Your division is considering two projects with the following net cash flows Project A 0= -$25 1= $5 2= $10 3= $17 Project B 0= -$20 1= $10 2= $9 3= $6

Your division is considering two projects with the following net cash flows.

Project A 0= -$25 1= $5 2= $10 3= $17
Project B 0= -$20 1= $10 2= $9 3= $6

What are the projects NPV's assuming the WACC is 5%? 10%? and 15%?
What are the projects IRR,s at each of these WACC's?
If the WACC was 5% and project A and B were mutually exclusive, which project would you choose?
What if the WACC was 10%? 15%?


SOLUTION PREVIEW
Project A
Project B
Year
Cash flows
PV @5%
PV @10%
PV @15%
Year
Cash flows
PV @5%
PV @10%
PV @15%
0
-25
 $   -25.00
 $   -25.00
 $   -25.00
0
-20
 $   -20.00
 $   -20.00
 $   -20.00
1
5
 $       4.76
 $       4.55
 $       4.35
1
10
 $       9.52
 $       9.09
 $       8.70

 File name: Project_A_and_B.xlsx  File type:  .doc  PRICE: $12